Document Number
13-168
Tax Type
Corporation Income Tax
Description
Taxpayer failed to timely file protective claims
Topic
Filing Extensions
Records/Returns/Payments
Statute of Limitations
Taxpayers' Remedies
Date Issued
08-29-2013

August 29, 2013



Re: § 58.1-1821 Application: Corporate Income Tax

Dear *****:

This will reply to your letter in which you seek reconsideration of the Department's determination letter, issued as Public Document (P.D.) 12-180 (11/9/2012), to ***** (the "Taxpayer") for the taxable years ended December 31, 2004 and 2005.

FACTS

In P.D. 12-180, the Department determined the Taxpayer had failed to timely amend its protective claim in conjunction with a court case and, therefore, the claims for the 2004 and 2005 taxable years were not filed within the statute of limitations. The Taxpayer seeks a redetermination, contending the 2004 claim was filed with its addendum for the protective claim contemporaneously to the Department's denial of the claim, and the addendum should have been considered as a request for redetermination. In addition, the Taxpayer asserts the Department mishandled the filing of the 2005 tax return by accepting the payment of the telecommunications minimum tax without the filing of corporate income tax return.

DETERMINATION

Statute of Limitations

Virginia Code § 58.1-1824 provides that "any person who has paid an assessment of taxes administered by the Department of Taxation may preserve his judicial remedies by filing for refund with the Tax Commissioner ...within three years of the date such tax was assessed."

In this case, the Taxpayer had filed protective claims for refund that were held without decision pending the final resolution of Virginia Cellular, LLC v. Virginia Department of Taxation, 276 Va. 486, 666 S.E.2d 374 (2008). These claims were denied on May 4, 2009. As of that date, the Taxpayer no longer had a protective claim for the 2004 or 2005 taxable years pending with or under consideration by the Department. Accordingly, when the Taxpayer subsequently filed its addendum, the Department considered them to be new protective claims subject to the three-year statute of limitations. See P.D. 12-180.

The Taxpayer argues, however, that the claim should be permitted because it was filed contemporaneously to the Department's denial. The addendum to the protective claim was not filed until May 11, 2009, which was seven days after the Department issued its denial on May 4, 2009.

Statute of limitations serve to protect individuals, businesses, and governments from situations "in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise." See United States v. Kubrick, 444 U.S. 111, 117, 100 S.Ct. 352, 317 (1979). The United States Supreme Court also expressed reluctance in the Kubrick decision to extend the statute of limitations beyond that which the legislature intended. The Department is unwilling to do so as well.

The Department rendered its decision with regard to the Taxpayer's original protective claim on May 4, 2009. Any filing by the Taxpayer subsequent to that date could not be considered to be an addendum to a closed claim, and would be a new protective claim subject to the statute of limitations set forth under Va. Code § 58.1­1824.

Redetermination

Pursuant to the authority granted the Department under Va. Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Va. Code § 58.1­1821. Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F permits taxpayers to request a reconsideration of a determination issued under Va. Code § 58.1-1821. Such requests, however, must meet one of the four following requirements:
  • 1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner's misstatement of the facts presented or a clarification of the original facts presented in the taxpayer's administrative appeal;
  • 2. The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;
  • 3. The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or
  • 4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the Department, and the additional evidence or documentation could produce a result different from the original determination.

The Taxpayer filed its addendum to the protective claim requesting a refund for overpayment of telecommunications minimum tax based on computational errors made on the original returns. The initial protective claim was based Virginia's authority to impose the telecommunications minimum tax on pass-through entities.

The addendum does not assert any misstatement of facts or misapplication of Virginia policy. Further, the Department's determination with regard to the protective claim was issued as result of a legislative change effecting the taxable years at issue. In addition, the rationale and documentation related to the addendum would not have had an impact on the determination issued by the Department on May 4, 2009. As such, the addendum did not meet any of the requirements of reconsideration under Title 23 VAC 10-20-165 F.

Tax Returns

In P.D. 12-180, the Department concluded the Taxpayer failed to file a corporate income tax return. Because no return was properly filed, the date of payment, which created a self assessment, was the original due date of the 2005 tax return or April 17, 2006. The Taxpayer contests this determination, claiming the Department overlooked its own operating procedures.

The Taxpayer claims the Department has historically created returns in its system when taxpayers have failed to file a corporate income tax return (Form 500) with its telecommunications company minimum tax form (Form 500T). The Taxpayer asserts the creation of such returns by the Department indicates acceptance of a Form 500T as a complete return.

When a taxpayer submits a Form 500T without the required Form 500, the Department does create a transaction return in its system. Such transactions are required in order to process payments made with Form 500Ts. Similar transactions are created for taxpayers that fail to file other types of returns in order to process payments or issue assessments. These entries on the Department's computer system, however, do not relieve a taxpayer of the responsibility to file a complete tax return as required by the Department.

As indicated in P.D. 12-180, Va. Code § 58.1-202 7 grants the Tax Commissioner the authority to prescribe "the forms of books, schedules and blanks to be used in the assessment and collection of state taxes." Under Title 23 VAC 10-120­320 C, every corporation required to file a return for a taxable year must complete a return as prescribed by the Department and provide a complete copy of the corporation's federal income tax return, including schedules and other information provided to the Internal Revenue Service. Further, the Department's instructions for telecommunications corporations require taxpayers to file a Form 500 and attach Form 500T.

In this case, the Department does not have a record of receiving a timely filed 2005 Form 500T. As a result, the Department issued an assessment in November 2006. The Taxpayer asserts the Department mishandled the original Form 500T, but has provided no evidence to support such a claim. Without such evidence, the Department cannot consider the Taxpayer to have filed a return before it filed a 2005 corporate income tax return in October 2008 (a copy of a 2005 Form 500T was provided in February 2008).

Taxpayers are allowed to elect a six-month extension to file their returns. In order to elect an extension, a taxpayer must (i) file the return within the extended period, and (ii) on or before the original due date for the filing of the return, pay the full amount properly estimated as the balance of the tax due for the taxable year. See Va. Code § 58.1-453. If a taxpayer has not filed an original return by the extended due date, a valid election has not been made. If a return is not filed within an extension period, the extension is negated and the last day allowed for the timely filing of the return reverts to the original due date under Va. Code § 58.1-499 D.

As explained in P. D. 12-180, when a return is not timely or properly filed, a self assessment would be deemed to have occurred when the tax was paid. The Taxpayer paid estimated payments sufficient to cover its liability for the 2005 taxable year. Such payments are deemed to have occurred as of the original due date of the tax return or April 17, 2006. Accordingly, the statute of limitations for the Taxpayer to file a protective claim for refund expired on April 17, 2009. The Taxpayer did not file the protective claim for refund until May 11, 2009.

CONCLUSION

Based on the evidence provided and the clear statutory authority, the Taxpayer failed to timely file protective claims for the 2004 and 2005 taxable years. As such, the refunds claimed by the Taxpayer for the taxable years at issue must be denied.

The Code of Virginia sections, regulations, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,



Craig M. Burns
Tax Commissioner



AR/1-5343578583.o

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46